1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple podcast or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,959 Speaker 1: at Bloomberg dot com slash podcast. Anyways, let's talk about 7 00:00:22,000 --> 00:00:23,720 Speaker 1: this market here, because we do have a little bit 8 00:00:23,720 --> 00:00:26,200 Speaker 1: of red on the screen. How much of this is 9 00:00:26,239 --> 00:00:28,280 Speaker 1: really the market's kind of bracing for all the FED 10 00:00:28,360 --> 00:00:30,040 Speaker 1: speak that we're going to get today. I think it's 11 00:00:30,080 --> 00:00:33,319 Speaker 1: like just a slew of FED speakers. I don't even 12 00:00:33,320 --> 00:00:35,720 Speaker 1: remember what the count is, but it's like William's Boston Cook, 13 00:00:35,840 --> 00:00:38,600 Speaker 1: Neil Cash Carrion's all today. I think it's too much. 14 00:00:39,080 --> 00:00:40,560 Speaker 1: It's a lot. Well, I would agree with you. I 15 00:00:40,600 --> 00:00:43,880 Speaker 1: think that I think transparency is actually a bad idea. 16 00:00:44,400 --> 00:00:48,159 Speaker 1: Bring back Alan Greenspan. I think I think that they 17 00:00:48,200 --> 00:00:52,320 Speaker 1: tried so hard to eliminate the idea of any risk 18 00:00:53,240 --> 00:00:56,639 Speaker 1: and risk analytics and your decision making when you when 19 00:00:56,640 --> 00:00:58,640 Speaker 1: you make an investment or trade. I think it's a 20 00:00:58,720 --> 00:01:01,360 Speaker 1: very bad thing. I think it acts He's functionally. We 21 00:01:01,400 --> 00:01:05,199 Speaker 1: have so shortened the time frame on analysis it's actually 22 00:01:05,280 --> 00:01:07,840 Speaker 1: quite unhealthy in many ways. So the markets are hunting 23 00:01:07,880 --> 00:01:12,640 Speaker 1: for this devishnus. The signals out there is anybody pushing 24 00:01:13,000 --> 00:01:16,840 Speaker 1: poun didn't sound like he's pushing back. Well. Yesterday at Boston, 25 00:01:16,959 --> 00:01:19,600 Speaker 1: Raphael I think, came out and said, you know, look, 26 00:01:19,640 --> 00:01:21,679 Speaker 1: I think I'm pushing up where I may need to 27 00:01:21,720 --> 00:01:24,959 Speaker 1: push up, where I think my peak rate is. Mr 28 00:01:25,040 --> 00:01:29,959 Speaker 1: Kashkari was pretty clear yesterday that he said is where 29 00:01:29,959 --> 00:01:33,880 Speaker 1: he thinks we're going. Um. You know, I suspect it's 30 00:01:33,880 --> 00:01:36,600 Speaker 1: going to be very hard from the litany of other 31 00:01:36,640 --> 00:01:38,640 Speaker 1: members of the FMC to have much more of an 32 00:01:38,680 --> 00:01:44,440 Speaker 1: impact UM right now, given um what Powell said yesterday, 33 00:01:44,480 --> 00:01:46,959 Speaker 1: I would have, you know, and last week I was 34 00:01:46,959 --> 00:01:50,520 Speaker 1: a little shocked last week. Look, as a general matter, 35 00:01:51,640 --> 00:01:55,000 Speaker 1: I think the biggest problem they have is liquid is 36 00:01:55,040 --> 00:01:59,320 Speaker 1: too much liquidity. And every time they allow the stock market, 37 00:01:59,360 --> 00:02:02,400 Speaker 1: which they seem to ignore and the definition of liquidity, 38 00:02:02,440 --> 00:02:06,000 Speaker 1: to go rallying a lot, they're throwing more liquidity into 39 00:02:06,040 --> 00:02:08,280 Speaker 1: a market. It's putting a little bit of you know, 40 00:02:08,400 --> 00:02:11,560 Speaker 1: of of oil into a fire, and it raises the 41 00:02:11,639 --> 00:02:14,880 Speaker 1: risk that they have to do more, and it it 42 00:02:14,960 --> 00:02:18,240 Speaker 1: impedes with their impedes their efforts to try and achieve 43 00:02:18,280 --> 00:02:21,160 Speaker 1: a lower rate of inflation in a short period of time. 44 00:02:21,520 --> 00:02:23,839 Speaker 1: And when I think people also, just as a gentle matter, 45 00:02:23,919 --> 00:02:27,480 Speaker 1: missed to my my perspective, it's not just getting to 46 00:02:27,600 --> 00:02:31,160 Speaker 1: two percent, it's getting to a stable, ambient two percent level. 47 00:02:31,720 --> 00:02:35,840 Speaker 1: So you know, that's to me the bigger problem. I 48 00:02:35,880 --> 00:02:38,000 Speaker 1: don't know how fast they'll get to two percent. I mean, 49 00:02:38,040 --> 00:02:40,560 Speaker 1: I think Powell said it yesterday that they're hoping it 50 00:02:40,560 --> 00:02:43,560 Speaker 1: will be some time next year. But you know, you 51 00:02:43,560 --> 00:02:45,400 Speaker 1: could hit two percent in a day and then find 52 00:02:45,400 --> 00:02:47,799 Speaker 1: out six weeks later you're at six percent. That's not 53 00:02:47,840 --> 00:02:51,320 Speaker 1: what he wants. And so I think the liquidity issues 54 00:02:51,360 --> 00:02:54,280 Speaker 1: and constraints that the that the equity market seems to 55 00:02:55,680 --> 00:02:59,919 Speaker 1: apply or a problem for them. Well, I'm still wondering, though, 56 00:03:00,240 --> 00:03:02,000 Speaker 1: how much more we really even need to hear from 57 00:03:02,000 --> 00:03:04,960 Speaker 1: the Fed. Look, I asked Alan Blinder, the former vice 58 00:03:05,040 --> 00:03:08,120 Speaker 1: chair under Alan Greensman about this yesterday. He is the 59 00:03:08,160 --> 00:03:10,959 Speaker 1: Fed over communicating? He said, Look, they're not over communicating 60 00:03:11,000 --> 00:03:14,080 Speaker 1: at all, But how much of this do we do 61 00:03:14,120 --> 00:03:16,000 Speaker 1: the markets really need to hear? When the message is 62 00:03:16,040 --> 00:03:18,280 Speaker 1: repeatedly the same. We don't know what the end terminal 63 00:03:18,360 --> 00:03:19,840 Speaker 1: rate is, we don't know how much we need to 64 00:03:19,919 --> 00:03:23,720 Speaker 1: hike or data dependent. How much value are you really 65 00:03:23,760 --> 00:03:26,359 Speaker 1: getting from from that? Me? I think very little. I 66 00:03:26,400 --> 00:03:28,600 Speaker 1: think the biggest question, again, let's take a different issue, 67 00:03:28,720 --> 00:03:32,480 Speaker 1: is not just what the terminal rate is um. I 68 00:03:32,520 --> 00:03:35,080 Speaker 1: think the market and if you look at the forward 69 00:03:35,120 --> 00:03:37,360 Speaker 1: curve and the your dollar futures, it's been clear for 70 00:03:37,400 --> 00:03:38,960 Speaker 1: a while. The market just thinks we're going to hit 71 00:03:38,960 --> 00:03:41,400 Speaker 1: a peak and then go right back down right. I 72 00:03:41,440 --> 00:03:44,200 Speaker 1: think the fault. You know, the forward live or rates 73 00:03:44,200 --> 00:03:46,400 Speaker 1: are three and a half or so, not very far out, 74 00:03:47,080 --> 00:03:50,400 Speaker 1: and I think that seems to be a big mistake. 75 00:03:51,200 --> 00:03:53,240 Speaker 1: The only thing to first of all, look how well 76 00:03:53,280 --> 00:03:56,880 Speaker 1: the economy is still performing functionally. Certainly when you look 77 00:03:56,920 --> 00:04:00,480 Speaker 1: at employment, even with the FED having raised rates four 78 00:04:00,520 --> 00:04:04,400 Speaker 1: percentage points, give it take half percentage points in seven months, 79 00:04:05,120 --> 00:04:08,520 Speaker 1: why does anyone think that if we're going to slowly 80 00:04:08,600 --> 00:04:12,680 Speaker 1: glide into a trajectory towards lower inflation, but we're still 81 00:04:12,680 --> 00:04:15,000 Speaker 1: at functionally near full employment, that the FETE has to 82 00:04:15,040 --> 00:04:18,080 Speaker 1: do anything but just stay where they are for a 83 00:04:18,240 --> 00:04:21,520 Speaker 1: very very long time. All right, What's what's the lag? Then? 84 00:04:21,600 --> 00:04:23,760 Speaker 1: I mean, hell, you know what, what are you going 85 00:04:23,800 --> 00:04:26,359 Speaker 1: to tell Jerome Powell? Well, first off, why do you 86 00:04:26,360 --> 00:04:30,000 Speaker 1: assume there's a lagnus? I mean, look, I've been I've 87 00:04:30,040 --> 00:04:32,159 Speaker 1: been on the show with or on Bloomberg now almost 88 00:04:32,160 --> 00:04:37,200 Speaker 1: twenty years, and I've been suggesting for actually this goes 89 00:04:37,240 --> 00:04:41,000 Speaker 1: back to the late nineties, that zero interest rates are 90 00:04:41,040 --> 00:04:45,520 Speaker 1: actually antithetical to growth and two very too good economic 91 00:04:45,520 --> 00:04:48,479 Speaker 1: and financial decision making, and that at an ambient level 92 00:04:48,480 --> 00:04:50,600 Speaker 1: of interest rates, say between two and a half and 93 00:04:50,680 --> 00:04:55,480 Speaker 1: five percent, is actually a very healthy environment and this 94 00:04:55,560 --> 00:04:58,520 Speaker 1: economy will perform just fine at that level once you've 95 00:04:58,560 --> 00:05:02,960 Speaker 1: gone through the transition of leaving ultra low behind you. 96 00:05:03,040 --> 00:05:05,279 Speaker 1: And I think what you're seeing in many ways is 97 00:05:05,320 --> 00:05:08,440 Speaker 1: exactly that there are parts of the economy that are 98 00:05:08,480 --> 00:05:12,039 Speaker 1: responding to the to the upward movement in rates. But 99 00:05:12,120 --> 00:05:14,600 Speaker 1: even now you're already seeing where two percentage points lower 100 00:05:14,640 --> 00:05:18,240 Speaker 1: in mortgages and the mortgage markets coming back to life. Yeah, 101 00:05:18,440 --> 00:05:20,680 Speaker 1: is it? So? Is is it working here? I mean, 102 00:05:20,720 --> 00:05:22,960 Speaker 1: in the last about thirty seconds that we have is 103 00:05:23,560 --> 00:05:27,240 Speaker 1: the FEDS tightening policy? Are we seeing effects of it already? 104 00:05:27,320 --> 00:05:29,440 Speaker 1: Or are we so to wait. But you've seen you've 105 00:05:29,440 --> 00:05:32,640 Speaker 1: seen some effects on certain areas of economy, and you've 106 00:05:32,680 --> 00:05:36,919 Speaker 1: certainly seen some effect on prices, although again some of 107 00:05:36,960 --> 00:05:39,160 Speaker 1: that is as much due to the year on your 108 00:05:39,200 --> 00:05:42,400 Speaker 1: comparisons to very very high rate levels. But what the 109 00:05:42,480 --> 00:05:44,680 Speaker 1: longer term effects are we don't know yet. But I 110 00:05:44,680 --> 00:05:48,680 Speaker 1: wouldn't rush to judgment that that a three and a 111 00:05:48,720 --> 00:05:51,960 Speaker 1: half to four percent or four and a half interest 112 00:05:52,000 --> 00:05:54,360 Speaker 1: rate level is going to be catastrophic, which everyone seems 113 00:05:54,360 --> 00:05:56,840 Speaker 1: to be working on. I'm just now reading his bio 114 00:05:57,000 --> 00:06:01,200 Speaker 1: the University of Cambridge Department of Applied Mathematics and Theoretical 115 00:06:01,279 --> 00:06:06,800 Speaker 1: Physics fusion. How far off fusions exists already in terms 116 00:06:06,839 --> 00:06:10,200 Speaker 1: of well, you're talking about energy, what you're talking about 117 00:06:10,600 --> 00:06:13,520 Speaker 1: on the planet of it, I would bet it's forty 118 00:06:13,600 --> 00:06:17,960 Speaker 1: years off. That the mechanisms for containing the plasma are 119 00:06:18,000 --> 00:06:20,599 Speaker 1: a problem, but it's the first time they've actually gotten 120 00:06:20,640 --> 00:06:22,440 Speaker 1: more energy out and man, and as soon as they 121 00:06:22,480 --> 00:06:26,400 Speaker 1: get it working, of course, that's a tremendous step for humanity. 122 00:06:26,400 --> 00:06:28,600 Speaker 1: Although I don't think I don't think the President is 123 00:06:28,600 --> 00:06:31,880 Speaker 1: gonna be able to complain about too much profitability for oil, 124 00:06:32,120 --> 00:06:36,840 Speaker 1: the amount the amount of previous nuclear fusion vision whatever 125 00:06:36,960 --> 00:06:41,040 Speaker 1: people that are now in the financial sector is hilarious. Anyways, 126 00:06:41,080 --> 00:06:49,080 Speaker 1: Neil Grossman, former CIO with t k NG capitals down 127 00:06:49,160 --> 00:06:52,840 Speaker 1: four tents of one percent, down down one NASTAC only 128 00:06:52,880 --> 00:06:56,600 Speaker 1: down half a percent, which that's like not the volatility 129 00:06:56,640 --> 00:06:59,359 Speaker 1: that we're used to in last year. What do you think, um, 130 00:06:59,520 --> 00:07:01,960 Speaker 1: do you are you attention to VIX? I know you're 131 00:07:01,960 --> 00:07:04,400 Speaker 1: going to make it, Tom Cain, that's my point. Mentioned 132 00:07:05,120 --> 00:07:08,880 Speaker 1: eighteen sixty seven right now, Now we remember back when 133 00:07:08,920 --> 00:07:11,960 Speaker 1: it was seventies eighties. Yeah, it was I think in 134 00:07:12,280 --> 00:07:16,080 Speaker 1: Pete COVID it hit eighty three. That was the highest volatility. 135 00:07:16,080 --> 00:07:18,760 Speaker 1: But look you were getting eight, like seven eight swings 136 00:07:18,760 --> 00:07:20,800 Speaker 1: in either direction. Um, but you know, that's a really 137 00:07:20,800 --> 00:07:24,559 Speaker 1: good question to ask. Our next guest, Michael Cogito joins 138 00:07:24,600 --> 00:07:27,960 Speaker 1: US president and portfolio manager of the Permanent Portfolio family 139 00:07:28,000 --> 00:07:30,680 Speaker 1: of funds, and he joins, of course, the program to 140 00:07:30,720 --> 00:07:33,600 Speaker 1: talk about this market. Michael, thank he was always for joining. 141 00:07:34,080 --> 00:07:36,760 Speaker 1: What do you do with the VIX right now? Sure? 142 00:07:36,800 --> 00:07:40,480 Speaker 1: Good morning. Um, Well, it's an indicator of volatility and 143 00:07:40,640 --> 00:07:44,400 Speaker 1: concern or fear, but it isn't an indicator of alatility. 144 00:07:44,560 --> 00:07:51,440 Speaker 1: Really I think, well, I mean right now, the numbers 145 00:07:51,520 --> 00:07:54,240 Speaker 1: loaves and there's a lack of volatility, So yes, it 146 00:07:54,560 --> 00:07:57,440 Speaker 1: isn't it's an indicator at the moment or a byproduct 147 00:07:57,520 --> 00:08:01,200 Speaker 1: of a lack of vulatility. As as you guys mentioned, Um, 148 00:08:01,240 --> 00:08:03,760 Speaker 1: you know, you're not seeing white swings like you saw 149 00:08:03,840 --> 00:08:07,480 Speaker 1: last year, at least right now, and the market appears 150 00:08:07,520 --> 00:08:11,320 Speaker 1: to be a little bit more calmer um and UM, 151 00:08:11,360 --> 00:08:13,200 Speaker 1: you know, we'll see what happens. It's a long year, 152 00:08:13,280 --> 00:08:15,720 Speaker 1: but but that's what you see right now. Okay, So 153 00:08:15,760 --> 00:08:18,640 Speaker 1: a stupid question for what is in the driver's seat 154 00:08:18,880 --> 00:08:24,160 Speaker 1: fed uh FED speak earnings? What I would say the 155 00:08:24,200 --> 00:08:26,800 Speaker 1: primary driver is the FED, and probably a second concern 156 00:08:26,880 --> 00:08:30,040 Speaker 1: with the earnings. Um. You know, I think that the 157 00:08:30,080 --> 00:08:33,120 Speaker 1: FED is story one and has been and will continue 158 00:08:33,120 --> 00:08:35,680 Speaker 1: to be, and you know it was earlier this week 159 00:08:35,720 --> 00:08:38,560 Speaker 1: as well. I think what you've had with the FED 160 00:08:39,000 --> 00:08:43,240 Speaker 1: is the what you're hearing out of the FED is 161 00:08:43,280 --> 00:08:48,040 Speaker 1: consistent with the markets expectations, and as a result, the 162 00:08:48,080 --> 00:08:52,920 Speaker 1: market is okay generally speaking with UM FED speak and 163 00:08:52,960 --> 00:08:55,439 Speaker 1: where we're at and where we might be going, and 164 00:08:55,520 --> 00:08:58,160 Speaker 1: so you know you've got kind of a quieter trade 165 00:08:58,200 --> 00:09:00,520 Speaker 1: going on now. That could all be up ended, you know, 166 00:09:00,559 --> 00:09:03,720 Speaker 1: an hour from now with some new information, But for 167 00:09:03,800 --> 00:09:06,160 Speaker 1: the moment of the last few days, that's what you've had. 168 00:09:06,320 --> 00:09:10,280 Speaker 1: And even this week with Powell's UH uh d C, 169 00:09:10,760 --> 00:09:13,040 Speaker 1: you know, one on one Q and A yesterday, I mean, 170 00:09:13,320 --> 00:09:16,760 Speaker 1: there were no surprises there. UM. Earlier in the week 171 00:09:16,760 --> 00:09:20,080 Speaker 1: there were no surprises. Or last week's meeting, there were 172 00:09:20,080 --> 00:09:22,640 Speaker 1: no surprises. And so as a result, the market is 173 00:09:23,160 --> 00:09:27,600 Speaker 1: settling down to more on fundamentals and UM and maybe 174 00:09:28,000 --> 00:09:30,440 Speaker 1: UH selling off a little bit after the big run 175 00:09:30,640 --> 00:09:33,160 Speaker 1: based on earnings, based on maybe a little too far, 176 00:09:33,200 --> 00:09:36,839 Speaker 1: too fast. But but you know, stocks were very oversold 177 00:09:36,880 --> 00:09:39,199 Speaker 1: coming out of December, so that's why you haven't seen 178 00:09:39,240 --> 00:09:41,360 Speaker 1: a big sell off either. I mean, it's settled into 179 00:09:41,400 --> 00:09:43,760 Speaker 1: some sort of valuation that makes sense given the Fed 180 00:09:43,800 --> 00:09:46,959 Speaker 1: and everything else right now. We were always told don't 181 00:09:47,000 --> 00:09:49,679 Speaker 1: fight the Fed, but we're fighting the Fed. Why is 182 00:09:49,720 --> 00:09:53,120 Speaker 1: there such a disconnect between the market pricing and uh 183 00:09:53,640 --> 00:09:59,000 Speaker 1: the Fed speak. I'm not so sure we're fighting the Fed. 184 00:09:59,200 --> 00:10:03,640 Speaker 1: I mean, value relations have adjusted from December that some 185 00:10:03,679 --> 00:10:06,360 Speaker 1: would argue they're a little even I might argue they're 186 00:10:06,360 --> 00:10:08,760 Speaker 1: a little higher than maybe they should be given the 187 00:10:09,559 --> 00:10:14,760 Speaker 1: macro with potentially a slowing economy. Um. In terms of 188 00:10:14,800 --> 00:10:17,920 Speaker 1: how far they came in January, although you had such 189 00:10:17,920 --> 00:10:21,640 Speaker 1: a strong jobs number last week that really I think 190 00:10:21,760 --> 00:10:25,080 Speaker 1: was so strong it was a surprise. Um. And it 191 00:10:25,080 --> 00:10:27,559 Speaker 1: remains to be seen whether there's some novelies and that 192 00:10:27,640 --> 00:10:30,840 Speaker 1: it will kick out and in further months. But you know, 193 00:10:30,920 --> 00:10:35,520 Speaker 1: honestly speaking, it's very difficult to have a recession with 194 00:10:35,640 --> 00:10:39,040 Speaker 1: the job market so strong, and so what that's done, 195 00:10:39,160 --> 00:10:42,680 Speaker 1: what that's done is that's kept the soft landing scenario 196 00:10:43,360 --> 00:10:46,520 Speaker 1: very much alive and the market is comfortable with that. 197 00:10:46,600 --> 00:10:49,760 Speaker 1: So again getting back to the first question, Um, you know, 198 00:10:50,000 --> 00:10:54,200 Speaker 1: think think the market perceives things to be okay. Um. 199 00:10:54,679 --> 00:10:58,120 Speaker 1: And and as a result of voltio is little muted. Well, 200 00:10:58,120 --> 00:11:00,480 Speaker 1: does that mean that when it comes to the catalyst 201 00:11:00,520 --> 00:11:03,040 Speaker 1: that then move the stock market on an inter day basis, 202 00:11:03,080 --> 00:11:07,280 Speaker 1: You were then seeing more emphasis put on initial jobless 203 00:11:07,280 --> 00:11:14,320 Speaker 1: claims the payrolls report as opposed to say the earnings picture. Um. Well, 204 00:11:14,360 --> 00:11:18,040 Speaker 1: I mean everybody has expected the earnings estimates to come 205 00:11:18,080 --> 00:11:21,679 Speaker 1: down and and so far the earnings we're still you know, 206 00:11:21,920 --> 00:11:23,600 Speaker 1: in the middle of ear each season so we don't 207 00:11:23,600 --> 00:11:25,480 Speaker 1: really have the data on where they ended up, but 208 00:11:25,880 --> 00:11:28,880 Speaker 1: that wouldn't be a surprise now given the run and 209 00:11:28,960 --> 00:11:31,480 Speaker 1: stocks multiples have expanded during that time a little bit, 210 00:11:31,520 --> 00:11:34,520 Speaker 1: which is a little bit interesting given the macro story 211 00:11:34,520 --> 00:11:38,800 Speaker 1: of a possible slowdown. Um, but while we may have 212 00:11:38,840 --> 00:11:41,280 Speaker 1: a slowdown, you're not seeing it in the labor and 213 00:11:41,280 --> 00:11:43,920 Speaker 1: and so you know, if people are working and spending, 214 00:11:44,600 --> 00:11:47,560 Speaker 1: then it's very hard to have a deep recession. And 215 00:11:47,679 --> 00:11:50,640 Speaker 1: as long as that's true, now, labors lagging indicators, so 216 00:11:50,880 --> 00:11:53,840 Speaker 1: you know that could change, and and then you know, 217 00:11:53,880 --> 00:11:56,320 Speaker 1: the labor just gets added to the other macro negatives. 218 00:11:56,320 --> 00:11:58,960 Speaker 1: But at the moment that hasn't happened. And and as 219 00:11:58,960 --> 00:12:03,680 Speaker 1: a result, people like the economy, um, you know, soft landing, 220 00:12:03,760 --> 00:12:08,679 Speaker 1: maybe shallow recession, etcetera, etcetera, And and equities are okay 221 00:12:08,679 --> 00:12:11,080 Speaker 1: with that for the moment um. I think the one 222 00:12:11,200 --> 00:12:14,080 Speaker 1: risk factor there in that story though, is that there 223 00:12:14,160 --> 00:12:16,640 Speaker 1: was such a move and interest late last year and 224 00:12:16,640 --> 00:12:20,959 Speaker 1: the feat is tapering, but still um, that move hasn't 225 00:12:21,000 --> 00:12:23,520 Speaker 1: been fully factored in. It hasn't worked its way through 226 00:12:23,520 --> 00:12:28,400 Speaker 1: the economy yet, and so it's possible that there's more 227 00:12:28,520 --> 00:12:30,960 Speaker 1: negative and increasingly negative news to come out in the 228 00:12:31,000 --> 00:12:33,959 Speaker 1: future as those interest rates work their way through and 229 00:12:34,000 --> 00:12:36,160 Speaker 1: actually slow things down. We haven't seen that yet, but 230 00:12:36,200 --> 00:12:39,400 Speaker 1: that's still a distinct possibility. Just back to earnings for 231 00:12:39,400 --> 00:12:42,520 Speaker 1: a second. That is margin pressure going to go away 232 00:12:42,520 --> 00:12:50,160 Speaker 1: anytime soon? Um? Well, in theory, if inflation alleviates, that 233 00:12:50,200 --> 00:12:54,920 Speaker 1: would decrease the pressure on margins um and you know 234 00:12:55,000 --> 00:13:00,200 Speaker 1: other cost factors. So yeah, the answer is yes, maybe, um, 235 00:13:00,200 --> 00:13:03,400 Speaker 1: but we don't know that either. And the inflation has 236 00:13:03,440 --> 00:13:06,559 Speaker 1: been coming down. I personally don't think it's going to 237 00:13:06,640 --> 00:13:09,120 Speaker 1: come down to the fetes two percent. I think it's 238 00:13:09,120 --> 00:13:12,120 Speaker 1: gonna settle somewhere at three, four or five percent when 239 00:13:12,160 --> 00:13:15,400 Speaker 1: all of a a sudden done, And then the question becomes, well, 240 00:13:15,480 --> 00:13:19,200 Speaker 1: you know, can the U. S. Economy uh grow really 241 00:13:19,280 --> 00:13:22,040 Speaker 1: you know readjusting to inflation rate at that level at 242 00:13:22,120 --> 00:13:25,920 Speaker 1: least where we are you know right now. So you 243 00:13:25,960 --> 00:13:29,120 Speaker 1: know that's not the The U. S. Economy has grown 244 00:13:29,200 --> 00:13:31,120 Speaker 1: with inflation at those levels. I mean you can look 245 00:13:31,160 --> 00:13:33,640 Speaker 1: to the nineteen eighties for that, and you know the 246 00:13:33,640 --> 00:13:36,440 Speaker 1: inflation rate took ten plus years to come down from 247 00:13:36,440 --> 00:13:38,120 Speaker 1: where it was in the early eighties, Yet you had 248 00:13:38,320 --> 00:13:40,760 Speaker 1: a good economic growth decade in the eighties for the 249 00:13:40,760 --> 00:13:44,400 Speaker 1: most parts. So so it can do that, and you 250 00:13:44,400 --> 00:13:47,000 Speaker 1: know that maybe where we're at the other factor, I 251 00:13:47,040 --> 00:13:49,960 Speaker 1: think you have to consider with inflation that again we 252 00:13:50,000 --> 00:13:52,600 Speaker 1: don't know the effects yet. But you know, we passed 253 00:13:52,640 --> 00:13:57,200 Speaker 1: three something trillion dollars in in fiscal policy with the 254 00:13:57,240 --> 00:14:02,080 Speaker 1: Inflation Reduction Act and the Budget Deal late December. That 255 00:14:02,120 --> 00:14:04,679 Speaker 1: money hasn't been spent, It hasn't cycled its way through 256 00:14:04,679 --> 00:14:09,120 Speaker 1: the economy yet, um And so will that reduce the 257 00:14:09,200 --> 00:14:13,000 Speaker 1: decline and inflation once that money starts to work its 258 00:14:13,000 --> 00:14:15,439 Speaker 1: way through the economy and and so that would be 259 00:14:15,520 --> 00:14:18,800 Speaker 1: a factor that would maybe mitigate the decline and inflation 260 00:14:18,920 --> 00:14:20,760 Speaker 1: that we haven't seen. So you've got a lot of 261 00:14:20,760 --> 00:14:24,440 Speaker 1: cross currents right now going in both directions, and it 262 00:14:24,520 --> 00:14:27,480 Speaker 1: remains to be seen where we settle. But but I 263 00:14:27,560 --> 00:14:30,280 Speaker 1: think you know we're settling somewhere near at least in 264 00:14:30,320 --> 00:14:34,000 Speaker 1: the short term where the FED maybe tapering and waiting, 265 00:14:34,000 --> 00:14:36,040 Speaker 1: and that would be around that five percent number. Okay, 266 00:14:36,080 --> 00:14:40,560 Speaker 1: So what's your investment thesis given all that, Well, we 267 00:14:40,600 --> 00:14:44,360 Speaker 1: would be pretty diversified right now under the theory. There's 268 00:14:44,360 --> 00:14:47,760 Speaker 1: a lot of question marks and um, A lot of 269 00:14:47,840 --> 00:14:50,200 Speaker 1: unknowns and there really is there's a lot of things 270 00:14:50,280 --> 00:14:53,080 Speaker 1: we just can't answer at the moment. So we're uh, 271 00:14:53,680 --> 00:14:57,000 Speaker 1: we we run a strategy that that you know, invest 272 00:14:57,080 --> 00:15:00,040 Speaker 1: in a variety of different non correlated asset class to 273 00:15:00,200 --> 00:15:03,720 Speaker 1: so precious metals, real estate, US and non US equities, 274 00:15:03,760 --> 00:15:06,440 Speaker 1: and US and non US fixed income. And and we 275 00:15:06,480 --> 00:15:10,280 Speaker 1: would add to advocate a strategy that does that. UM. 276 00:15:10,440 --> 00:15:14,160 Speaker 1: We think with inflation risk, with the uncertainty factor UM, 277 00:15:14,200 --> 00:15:16,280 Speaker 1: and the amount of equity has been created over the 278 00:15:16,360 --> 00:15:21,040 Speaker 1: last you know, several years, healthy investment in gold would 279 00:15:21,040 --> 00:15:23,440 Speaker 1: make sense, especially if the fet IS is slowing down 280 00:15:23,440 --> 00:15:25,880 Speaker 1: and stopping or maybe cutting at some point in the future. 281 00:15:26,480 --> 00:15:29,640 Speaker 1: Over as well, UM equities were not negative on them, 282 00:15:29,640 --> 00:15:33,680 Speaker 1: but we're sensitive to valuation. We would recommend a variety 283 00:15:33,760 --> 00:15:36,360 Speaker 1: of stocks and different asset classes so that you're not 284 00:15:36,480 --> 00:15:40,520 Speaker 1: wedded to any one sector UM. And then on the 285 00:15:40,560 --> 00:15:44,680 Speaker 1: fixed income side, well, lengthening duration probably makes sense at 286 00:15:44,720 --> 00:15:47,760 Speaker 1: some point. We're not quite there yet, so we would 287 00:15:47,760 --> 00:15:51,080 Speaker 1: advocate high quality and short duration fixed income, especially on 288 00:15:51,120 --> 00:15:54,239 Speaker 1: the on the corporate side. And we've found some opportunities 289 00:15:54,280 --> 00:15:58,720 Speaker 1: in you know, pretty short term investment grade paper UM 290 00:15:58,840 --> 00:16:01,240 Speaker 1: and then a health the doe so hard assets like 291 00:16:01,280 --> 00:16:04,000 Speaker 1: real estate, commodities, so the equities of those businesses which 292 00:16:04,480 --> 00:16:06,440 Speaker 1: you think on the commodity side, there's a there's a 293 00:16:06,480 --> 00:16:10,160 Speaker 1: longer cycle at play in that space energy, you know, 294 00:16:10,640 --> 00:16:14,240 Speaker 1: commodity metals, those sorts of things UM, and real estate 295 00:16:14,280 --> 00:16:17,960 Speaker 1: as a hedge and and also potentially uh, you know, 296 00:16:18,160 --> 00:16:21,320 Speaker 1: rising rentals and all that stuff. Certainly something we're gonna 297 00:16:21,360 --> 00:16:22,880 Speaker 1: keep our eye on. Brent Crude. Of course at eighty 298 00:16:22,960 --> 00:16:27,640 Speaker 1: three as we speak, Michael Codino over at President portfolio 299 00:16:27,680 --> 00:16:29,840 Speaker 1: manager sees me of the permanent portfolio family of funds, 300 00:16:29,840 --> 00:16:36,400 Speaker 1: we thank you. As always, a lot of uncertainty around 301 00:16:36,400 --> 00:16:39,960 Speaker 1: the inflation. Look, he says, Uh, if this situation changes, 302 00:16:40,200 --> 00:16:44,160 Speaker 1: big surprise, the centerment could move faster than uh basis 303 00:16:44,240 --> 00:16:47,840 Speaker 1: point pace. Uh. He also said that it's a reasonable 304 00:16:47,920 --> 00:16:51,320 Speaker 1: view most officials for a cast rates UH in the 305 00:16:51,400 --> 00:16:54,240 Speaker 1: range of five and five and a quarter percent. That's 306 00:16:54,240 --> 00:16:57,600 Speaker 1: what he's calling a reasonable view at this point. Thank 307 00:16:57,640 --> 00:17:00,600 Speaker 1: you for rescuing me. I appreciate that. Well, well, let's 308 00:17:00,600 --> 00:17:02,680 Speaker 1: ask if it is a reasonable view to someone who 309 00:17:02,680 --> 00:17:04,640 Speaker 1: has a lot more experience than either one of us 310 00:17:04,720 --> 00:17:07,280 Speaker 1: on on this front, and Yale. DiMartino Booth joins us. 311 00:17:07,440 --> 00:17:10,280 Speaker 1: She's a CEO, Chief strategist of Quill Intelligence. I believe 312 00:17:10,400 --> 00:17:13,800 Speaker 1: worked for the former Dallas FED as well, so she 313 00:17:13,880 --> 00:17:18,119 Speaker 1: has the capacity Daniel inside knowledge. Um. I was. I 314 00:17:18,200 --> 00:17:22,320 Speaker 1: was kind of uh Richard Fisher's senior adviser on all 315 00:17:22,400 --> 00:17:26,159 Speaker 1: things markets at the intersection of macroeconomic data. So I 316 00:17:26,240 --> 00:17:28,520 Speaker 1: was I was a role that no longer exists at 317 00:17:28,520 --> 00:17:34,119 Speaker 1: the Dallas head It's they eliminated the position Anthony left. Yeah, clearly. Yeah, 318 00:17:34,560 --> 00:17:37,240 Speaker 1: they're like, we can't replace it. End of story, Like 319 00:17:37,359 --> 00:17:40,120 Speaker 1: we're just giving up. Um. But it was pretty fascinating 320 00:17:40,160 --> 00:17:43,639 Speaker 1: throughout the crisis, especially drawing parallels between now and then 321 00:17:44,320 --> 00:17:49,679 Speaker 1: when Bernanke wanted to foment certainty and Powell and his 322 00:17:49,800 --> 00:17:56,040 Speaker 1: closest confidence Waller Williams, they want to foment uncertainty. So 323 00:17:56,119 --> 00:17:57,919 Speaker 1: they don't want to they don't want from markets to 324 00:17:58,040 --> 00:18:00,720 Speaker 1: lock anything in. And I think that that's why they're 325 00:18:00,760 --> 00:18:04,160 Speaker 1: having such a difficult time communicating because that's not how 326 00:18:04,200 --> 00:18:06,880 Speaker 1: we view the FED. It's not how we've been trained 327 00:18:06,960 --> 00:18:11,880 Speaker 1: for forty years to view communications from the FED. Well, 328 00:18:11,920 --> 00:18:13,880 Speaker 1: I mean, we didn't get much communication a law when 329 00:18:13,920 --> 00:18:17,760 Speaker 1: we had individual's law worth, we couldn't understand it when 330 00:18:17,760 --> 00:18:21,600 Speaker 1: we had green Span. I mean, what, why is there 331 00:18:21,640 --> 00:18:25,399 Speaker 1: the drive towards uncertainty at this point? I think they 332 00:18:25,480 --> 00:18:30,119 Speaker 1: really do want to keep the window open to be 333 00:18:30,400 --> 00:18:33,960 Speaker 1: higher for longer. And again, the only thing we've ever 334 00:18:33,960 --> 00:18:36,600 Speaker 1: known is lower for longer. But I think they're they're 335 00:18:36,640 --> 00:18:41,320 Speaker 1: they're desperately trying to say we want to maintain rates 336 00:18:41,359 --> 00:18:44,760 Speaker 1: at a high level that gives them license to continue 337 00:18:45,240 --> 00:18:49,399 Speaker 1: conducting quantitative tightening quote unquote in the background, what nobody 338 00:18:49,440 --> 00:18:51,600 Speaker 1: in the media ever asks him about, and what he 339 00:18:51,640 --> 00:18:54,480 Speaker 1: doesn't really talk about very much. Uh, you know, he 340 00:18:54,520 --> 00:18:56,879 Speaker 1: was asked about mortgage backed securities, would you ever consider 341 00:18:56,920 --> 00:18:59,840 Speaker 1: selling them, obviously for a big loss in this kind 342 00:18:59,840 --> 00:19:02,240 Speaker 1: of high interest rate environment, to purchase him at two 343 00:19:02,240 --> 00:19:04,920 Speaker 1: to and alf percent cuban Now mortgage rights are north 344 00:19:04,920 --> 00:19:07,800 Speaker 1: of six um. You know, when when he was asked directly, 345 00:19:07,840 --> 00:19:09,680 Speaker 1: he said, you know, it's not really something that we're 346 00:19:09,680 --> 00:19:13,480 Speaker 1: talking about right now. Next more uncertainty, And I think 347 00:19:13,480 --> 00:19:17,080 Speaker 1: that I think that that's his goal, uncertainty. Yeah, it's 348 00:19:17,080 --> 00:19:19,240 Speaker 1: interesting you bring that up with it the titening, because 349 00:19:19,480 --> 00:19:22,080 Speaker 1: I just says an aside Europe. I mean, that's the 350 00:19:22,200 --> 00:19:26,240 Speaker 1: big story I think for or potentially could be with 351 00:19:26,359 --> 00:19:29,000 Speaker 1: the with a sovereign bond market. Why is it not 352 00:19:30,119 --> 00:19:32,880 Speaker 1: as we do the unwind here? Why is that not 353 00:19:33,119 --> 00:19:38,160 Speaker 1: a focus? You know? I think he has tried so hard, 354 00:19:38,240 --> 00:19:40,800 Speaker 1: And I say he because I really do feel like 355 00:19:41,440 --> 00:19:46,320 Speaker 1: the Federal Reserve is a community of speakers leaders. But 356 00:19:46,440 --> 00:19:48,480 Speaker 1: at the end of the day, we really are. I mean, 357 00:19:48,840 --> 00:19:50,920 Speaker 1: yesterday was like, oh my gosh, the Super Bowl starting 358 00:19:50,920 --> 00:19:53,520 Speaker 1: at twelve thirty. I mean, the whole world shut down 359 00:19:53,560 --> 00:19:56,520 Speaker 1: waiting to hear Powell. So he really is this this 360 00:19:56,600 --> 00:20:00,680 Speaker 1: one person mechanism. And yet you know, you don't get 361 00:20:00,760 --> 00:20:04,199 Speaker 1: that same type of focus when you're talking about Europe 362 00:20:04,200 --> 00:20:07,560 Speaker 1: and tightening potentially faster than the United States. None of 363 00:20:07,600 --> 00:20:11,560 Speaker 1: that really matters. If the Fed doesn't pause or pivot, 364 00:20:11,960 --> 00:20:15,440 Speaker 1: If they really keep going, other central banks are going 365 00:20:15,480 --> 00:20:19,080 Speaker 1: to have an effect on global liquidity and then the 366 00:20:19,160 --> 00:20:23,000 Speaker 1: price of money. But if we maintain high rates and 367 00:20:23,080 --> 00:20:25,960 Speaker 1: don't go in a different direction, if we're not the leader, 368 00:20:26,160 --> 00:20:28,400 Speaker 1: if we don't follow the Bank of Canada in pausing, 369 00:20:28,920 --> 00:20:31,480 Speaker 1: then it's all irrelevant, uh, you know, is Michael Burry 370 00:20:31,520 --> 00:20:35,560 Speaker 1: said on on on Odd lots yesterday on Bloomberg it 371 00:20:35,920 --> 00:20:40,359 Speaker 1: would be a paradigm shift. Paradigm shift. Some heavy words 372 00:20:40,600 --> 00:20:43,240 Speaker 1: from Michael Burry. We don't listen to the shows, just 373 00:20:44,080 --> 00:20:46,919 Speaker 1: Bloomberg Markets and John and I listen to it on 374 00:20:46,960 --> 00:20:50,480 Speaker 1: repeating that is all just kidding. Danielle, I am getting 375 00:20:50,560 --> 00:20:52,560 Speaker 1: a question. I b to here into me. I want 376 00:20:52,560 --> 00:20:54,440 Speaker 1: to talk to you about the divergence you started seeing 377 00:20:54,440 --> 00:20:58,760 Speaker 1: the Federal Reserve. It feels like, whereas there was this consensus, 378 00:20:58,840 --> 00:21:01,800 Speaker 1: especially in the back half of two where it was 379 00:21:02,359 --> 00:21:04,720 Speaker 1: just be as hawkish as possible, until we start to 380 00:21:04,720 --> 00:21:07,960 Speaker 1: see some cracks and inflation, that seems to start diverging. 381 00:21:08,000 --> 00:21:10,680 Speaker 1: Now we have Neil Kashkary on the most hawkish end um, 382 00:21:10,760 --> 00:21:14,600 Speaker 1: others perhaps walking back some of the Fed's comments from 383 00:21:14,840 --> 00:21:17,879 Speaker 1: last Wednesday, to what extent is that by design? To 384 00:21:17,920 --> 00:21:22,800 Speaker 1: what extent is that divergence worth paying attention to? So 385 00:21:22,960 --> 00:21:26,920 Speaker 1: I think, I think really to the extent that that 386 00:21:27,119 --> 00:21:34,480 Speaker 1: the care Powell is guiding other speakers narratives. It's important. 387 00:21:34,520 --> 00:21:37,960 Speaker 1: And when you are inside the FED, I mean, wandering 388 00:21:37,960 --> 00:21:42,280 Speaker 1: off the reservation with a crazy view is looked down upon. 389 00:21:42,760 --> 00:21:45,359 Speaker 1: You cannot do that. So I mean you bring up 390 00:21:45,680 --> 00:21:48,280 Speaker 1: the best example of all Neil cash Cary, whose narrative 391 00:21:48,359 --> 00:21:50,520 Speaker 1: is completely flipped. We used to think he was the 392 00:21:50,520 --> 00:21:53,360 Speaker 1: biggest dove in the world, and now he's saying, oh, 393 00:21:53,400 --> 00:21:55,760 Speaker 1: maybe five point four percent, maybe we're gonna go higher. 394 00:21:56,320 --> 00:21:58,919 Speaker 1: I don't think that that that type of communication is 395 00:21:58,960 --> 00:22:04,000 Speaker 1: not is on articulated and condoned at the very top 396 00:22:04,320 --> 00:22:07,639 Speaker 1: of the head. Okay, with your background and experience, what 397 00:22:07,680 --> 00:22:12,080 Speaker 1: should they be doing at this point? Look, I think 398 00:22:12,119 --> 00:22:15,000 Speaker 1: what a few people are talking about, and hats off 399 00:22:15,080 --> 00:22:18,959 Speaker 1: to Rubensteins were bringing it up. It's it's the debt ceiling. 400 00:22:19,400 --> 00:22:22,800 Speaker 1: And it was yesterday it was Powell saying I'm not 401 00:22:22,840 --> 00:22:26,000 Speaker 1: stepping in and doing anything. Good luck, I'll see you 402 00:22:26,040 --> 00:22:29,040 Speaker 1: on the other side. That's I mean. People are not 403 00:22:29,080 --> 00:22:33,560 Speaker 1: talking about this ticking clock in the background and the 404 00:22:33,600 --> 00:22:37,119 Speaker 1: parallels to two thousand and eleven, which was really a 405 00:22:37,200 --> 00:22:40,960 Speaker 1: bad time for markets. And we've already had two rating 406 00:22:40,960 --> 00:22:43,840 Speaker 1: agencies come out and say, if this really does go 407 00:22:43,920 --> 00:22:45,720 Speaker 1: down to the wire, then we are going to be 408 00:22:45,800 --> 00:22:49,520 Speaker 1: potentially flirting with another downgrade of the sovereign debt of 409 00:22:49,560 --> 00:22:52,040 Speaker 1: the United States. People just are not They don't know 410 00:22:52,040 --> 00:22:53,399 Speaker 1: where to they don't know where to couch it. They 411 00:22:53,400 --> 00:22:55,800 Speaker 1: don't know where to put it. And so I think 412 00:22:55,880 --> 00:22:58,159 Speaker 1: that that that is the thing that so few were 413 00:22:58,200 --> 00:23:01,240 Speaker 1: talking about, is that we could have a sequel of 414 00:23:01,280 --> 00:23:03,720 Speaker 1: what markets look like in two thousand eleven, and that 415 00:23:03,760 --> 00:23:06,920 Speaker 1: would not be a good thing. Was that really his remant? 416 00:23:07,000 --> 00:23:11,040 Speaker 1: I mean, he's monetary, not fiscal or it's gonna bleed. 417 00:23:11,200 --> 00:23:14,919 Speaker 1: I gotta look at twenty seconds, of course, I but 418 00:23:15,000 --> 00:23:17,000 Speaker 1: there are ways for monetary to come to the rescue 419 00:23:17,000 --> 00:23:20,280 Speaker 1: of fiscal and yesterday Powell said, not on my watch. 420 00:23:20,680 --> 00:23:24,720 Speaker 1: That's your that's your takeaway, all right. Danielle di Martino, 421 00:23:24,800 --> 00:23:28,399 Speaker 1: booth CEO and chief stragist over at Quill Intelligence, we 422 00:23:28,480 --> 00:23:30,160 Speaker 1: thank you as always on a crucial day. Of course, 423 00:23:30,160 --> 00:23:33,800 Speaker 1: we're going to get a lot of fed Speaker k 424 00:23:36,000 --> 00:23:38,800 Speaker 1: CBS shares higher though in the day, up about four 425 00:23:38,880 --> 00:23:41,159 Speaker 1: percent on the session. Um, there's some M and A 426 00:23:41,200 --> 00:23:43,640 Speaker 1: news here. There's also some earnings news. We're gonna bring 427 00:23:43,680 --> 00:23:47,000 Speaker 1: in our very own. Jonathan Palmer, senior industry analyst with 428 00:23:47,080 --> 00:23:49,360 Speaker 1: Limberg Intelligence. What do you want to start with first, 429 00:23:49,400 --> 00:23:52,400 Speaker 1: the earnings or the acquisition? What's bigger for you? Oh? 430 00:23:52,440 --> 00:23:54,840 Speaker 1: Absolutely the acquisition. I mean the earnings came in and 431 00:23:54,920 --> 00:23:57,000 Speaker 1: kind of as expected a little bit stronger. But the 432 00:23:57,000 --> 00:24:00,600 Speaker 1: real story here is this deal for oak Street Health, 433 00:24:00,600 --> 00:24:03,640 Speaker 1: which has been rumored and bantered around by Bloomberg News 434 00:24:03,720 --> 00:24:05,639 Speaker 1: in the Wall Street Journal for the last couple of months, 435 00:24:05,640 --> 00:24:07,800 Speaker 1: and it really comes on the back of some other 436 00:24:07,840 --> 00:24:10,720 Speaker 1: big plays here in the health st I've never heard 437 00:24:10,760 --> 00:24:13,040 Speaker 1: of them, or maybe I should have, but now you 438 00:24:13,080 --> 00:24:15,600 Speaker 1: probably haven't heard of them. I mean, they're a Medicare 439 00:24:15,600 --> 00:24:20,359 Speaker 1: advantage platform that they service the Medicare advantage customer base. 440 00:24:20,400 --> 00:24:22,760 Speaker 1: They've only been around for about a decade. They have 441 00:24:22,920 --> 00:24:26,440 Speaker 1: centers in twenty one states where they manage these patients. 442 00:24:26,480 --> 00:24:29,240 Speaker 1: It's only I think a hundred and fifty five thousand 443 00:24:29,280 --> 00:24:31,680 Speaker 1: as at the end of last year. But it's really 444 00:24:31,720 --> 00:24:34,800 Speaker 1: a different kind of new age primary care platform, and 445 00:24:34,840 --> 00:24:37,359 Speaker 1: primary care is kind of all the rage in the 446 00:24:37,440 --> 00:24:42,080 Speaker 1: healthcare services business. We have Amazon buying one Medical, We've 447 00:24:42,080 --> 00:24:44,800 Speaker 1: got CBS with oak Street. There's been some rumors about 448 00:24:44,840 --> 00:24:48,480 Speaker 1: some of the other newer platforms um potentially getting acquired 449 00:24:48,520 --> 00:24:52,800 Speaker 1: as well. So everybody wants to own this primary care space. 450 00:24:52,960 --> 00:24:55,360 Speaker 1: H The one I forgot to mention was your Walgreens 451 00:24:55,440 --> 00:25:00,080 Speaker 1: owning Village, m D. So the move in pharmacy and 452 00:25:00,119 --> 00:25:03,280 Speaker 1: healthcare services in general is to just make the umbrella 453 00:25:03,440 --> 00:25:07,119 Speaker 1: bigger and and capture more of those patient workflows, you know, 454 00:25:07,200 --> 00:25:09,960 Speaker 1: in their enterprise and primary care is the kind of 455 00:25:09,960 --> 00:25:14,320 Speaker 1: the next battleground. Does um anybody from Justice or the 456 00:25:14,320 --> 00:25:18,399 Speaker 1: FTC say, hold on, wait a second, Well interesting you 457 00:25:18,440 --> 00:25:21,000 Speaker 1: say that, because the FTC is going to be examining 458 00:25:21,080 --> 00:25:24,600 Speaker 1: the Amazon One Medical and I wouldn't be surprised, you know, 459 00:25:24,640 --> 00:25:27,679 Speaker 1: given that that they also look at this Oak Street 460 00:25:27,680 --> 00:25:30,840 Speaker 1: and the CBS deal as well. I mean the reality is, 461 00:25:31,320 --> 00:25:33,040 Speaker 1: you know, for me as a health care analyst, I 462 00:25:33,040 --> 00:25:35,880 Speaker 1: don't necessarily see any conflicts of interest from a from 463 00:25:35,880 --> 00:25:39,600 Speaker 1: a pure antitrust perspective for Amazon and and One Medical. 464 00:25:39,880 --> 00:25:42,199 Speaker 1: I mean Amazon, that side of owning you know, some 465 00:25:42,240 --> 00:25:45,960 Speaker 1: pharmacy assets doesn't really deliver healthcare, so it's kind of 466 00:25:45,960 --> 00:25:49,080 Speaker 1: hard to see where the conflict is. You know, CVS 467 00:25:49,119 --> 00:25:53,159 Speaker 1: with three billion in revenue, you know, touching basically you know, 468 00:25:53,200 --> 00:25:58,159 Speaker 1: the majority of pressure points in the healthcare system. You know, 469 00:25:58,280 --> 00:26:00,399 Speaker 1: maybe there's an issue there, But again, they don't own 470 00:26:00,440 --> 00:26:02,959 Speaker 1: a lot of primary care assets now outside of minute clinics, 471 00:26:02,960 --> 00:26:08,040 Speaker 1: which is a very different beast than primary care. What 472 00:26:08,119 --> 00:26:10,479 Speaker 1: does that that mean for I mean, you mentioned the 473 00:26:10,520 --> 00:26:12,840 Speaker 1: Amazon kind of trying to get in. I remember a 474 00:26:12,880 --> 00:26:14,600 Speaker 1: while back. I think there was some sort of partnership 475 00:26:14,600 --> 00:26:17,280 Speaker 1: between Amazon. I must say it was a Berkshire Hathaway 476 00:26:17,480 --> 00:26:22,040 Speaker 1: and right. Um, do you start to see or are 477 00:26:22,080 --> 00:26:25,439 Speaker 1: we anticipating more of those larger non traditional health players 478 00:26:25,440 --> 00:26:28,800 Speaker 1: to enter the space. My view is that you know, 479 00:26:29,880 --> 00:26:33,320 Speaker 1: somebody famously set healthcare is very hard, and you know, 480 00:26:33,400 --> 00:26:36,880 Speaker 1: the non traditional players have been trying to get into 481 00:26:36,920 --> 00:26:40,400 Speaker 1: healthcare for years. I think Amazon's the furthest too long 482 00:26:40,520 --> 00:26:43,119 Speaker 1: and very frankly, I would say they're at the end 483 00:26:43,160 --> 00:26:45,840 Speaker 1: of the day nowhere in the grand scheme of things. 484 00:26:45,920 --> 00:26:49,320 Speaker 1: I mean, they do have their pharmacy. They started a 485 00:26:49,320 --> 00:26:52,000 Speaker 1: thing called Amazon Clinic, which they were offering two employers, 486 00:26:52,000 --> 00:26:55,240 Speaker 1: and then they quickly shuttered it. We'll see what happens 487 00:26:55,280 --> 00:26:59,040 Speaker 1: with one Medical. Um. You know, again, one medical is 488 00:26:59,040 --> 00:27:01,159 Speaker 1: not a very big player in the grand scheme of 489 00:27:01,240 --> 00:27:04,520 Speaker 1: things either. And you have the Googles and the Microsoft's 490 00:27:04,680 --> 00:27:08,000 Speaker 1: and and facebooks maybe hunting around the margin, but none 491 00:27:08,000 --> 00:27:11,480 Speaker 1: of them have really stepped into the delivery of care 492 00:27:11,640 --> 00:27:14,840 Speaker 1: in a meaningful way. So I don't see non traditional 493 00:27:14,880 --> 00:27:17,960 Speaker 1: players as being a huge threat. It's the incumbents like CBS, 494 00:27:18,080 --> 00:27:20,880 Speaker 1: like Walgreens, like United Health who are really the ones 495 00:27:20,920 --> 00:27:23,080 Speaker 1: who are are changing the healthcare system in the US 496 00:27:23,119 --> 00:27:25,920 Speaker 1: as we know it. This is a potentially stupid question, 497 00:27:26,080 --> 00:27:29,359 Speaker 1: as all of my questions are, do they eventually take 498 00:27:29,440 --> 00:27:33,320 Speaker 1: over my local doctor's office? Well, yeah, I think they do. 499 00:27:33,400 --> 00:27:37,000 Speaker 1: I mean, I live in northern New Jersey and the 500 00:27:37,119 --> 00:27:40,520 Speaker 1: big regional player in that space is a company called 501 00:27:40,800 --> 00:27:43,880 Speaker 1: Summit and Billa g m D just just bought that 502 00:27:44,560 --> 00:27:48,320 Speaker 1: uh so slowly but surely, the practices and the regional 503 00:27:48,320 --> 00:27:51,159 Speaker 1: practices are getting rolled up into these bigger organizations. I 504 00:27:51,160 --> 00:27:54,119 Speaker 1: don't think it happens overnight, um, but it is a 505 00:27:54,119 --> 00:27:56,679 Speaker 1: trend that we're seeing happen across the country. And I 506 00:27:56,760 --> 00:28:00,600 Speaker 1: just wonder how that impacts the health or that you get. 507 00:28:01,520 --> 00:28:04,040 Speaker 1: I mean, I'd rather deal with my individual doctor who 508 00:28:04,119 --> 00:28:07,439 Speaker 1: has his own practice, rather than a giant conglomerate of 509 00:28:07,760 --> 00:28:11,000 Speaker 1: you know, owned by whomever. Now it's a it's a 510 00:28:11,000 --> 00:28:13,520 Speaker 1: fair statement. I think that's why there's a lot of skepticism, 511 00:28:13,800 --> 00:28:16,800 Speaker 1: you know, among practitioners and and people like myself. I mean, 512 00:28:16,800 --> 00:28:19,080 Speaker 1: I don't even know that the economics, you know, from 513 00:28:19,080 --> 00:28:24,000 Speaker 1: the small business perspective even works for individual practitioners anymore. Well, 514 00:28:24,000 --> 00:28:25,960 Speaker 1: that's that's one of the problems. I mean, we have 515 00:28:26,080 --> 00:28:29,280 Speaker 1: seen this trend where there's been consolidation among providers. That's 516 00:28:29,280 --> 00:28:32,280 Speaker 1: why they've moved to some of these regional platforms and 517 00:28:32,320 --> 00:28:35,680 Speaker 1: consolidated themselves into bigger practices which are now being scooped 518 00:28:35,720 --> 00:28:40,480 Speaker 1: up by bigger companies. I mean the Amazon's are the 519 00:28:40,520 --> 00:28:43,640 Speaker 1: one Medicals, and Amazons and United Health and cvs is 520 00:28:43,680 --> 00:28:45,760 Speaker 1: of the world will tell you that, you know, when 521 00:28:45,760 --> 00:28:48,560 Speaker 1: they're looking at at the long term, that they're going 522 00:28:48,600 --> 00:28:51,440 Speaker 1: to provide you know, the best clinical outcomes at the 523 00:28:51,440 --> 00:28:54,720 Speaker 1: lowest costs. I think the proof needs to be seen 524 00:28:54,760 --> 00:28:57,360 Speaker 1: in the pudding to know that that that's actually going 525 00:28:57,400 --> 00:29:00,760 Speaker 1: to happen. I mean I personally, I mean I cover healthcare, 526 00:29:00,880 --> 00:29:04,600 Speaker 1: I use everything. I use One Medical, Walgreen, CBS, right Aid. 527 00:29:05,080 --> 00:29:06,320 Speaker 1: You know, I don't know that I have a great 528 00:29:06,320 --> 00:29:09,280 Speaker 1: experience across any of them. So when I sit there 529 00:29:09,320 --> 00:29:11,640 Speaker 1: and think about my primary care now being folded into 530 00:29:11,680 --> 00:29:14,920 Speaker 1: one of these organizations, I wonder what the future state 531 00:29:14,960 --> 00:29:16,840 Speaker 1: looks like. And I think that needs to be proven 532 00:29:16,840 --> 00:29:20,640 Speaker 1: out across the space. So that's more on the acquisition front. 533 00:29:20,680 --> 00:29:22,080 Speaker 1: We have about a minute left. I'm gonna put you 534 00:29:22,080 --> 00:29:23,280 Speaker 1: on the spot. Let's talk to us, talk to us 535 00:29:23,280 --> 00:29:25,920 Speaker 1: about the earnings here, um and what really stands out 536 00:29:25,960 --> 00:29:28,640 Speaker 1: to you there. Yeah, so they beat on revenue, they 537 00:29:28,680 --> 00:29:32,160 Speaker 1: beat a little bit on EPs UM. The retail portion 538 00:29:32,240 --> 00:29:34,920 Speaker 1: of their business was a little stronger because cold and 539 00:29:35,040 --> 00:29:39,400 Speaker 1: flu has come back. UM. The PBM, which is their 540 00:29:39,480 --> 00:29:43,320 Speaker 1: care mark business, continues to hum along. John Menchelin's specialty. 541 00:29:43,440 --> 00:29:45,840 Speaker 1: That's a that's always been a big driver of that business. 542 00:29:46,360 --> 00:29:49,000 Speaker 1: And the benefits business too is humming along as well. 543 00:29:49,040 --> 00:29:51,680 Speaker 1: There's not really any sea changes in in the core 544 00:29:51,760 --> 00:29:54,400 Speaker 1: of CVS. I mean, the most exciting thing is that 545 00:29:54,600 --> 00:29:58,040 Speaker 1: they've had this uh strategy of wanting to acquire primary 546 00:29:58,040 --> 00:29:59,680 Speaker 1: care and they've been talking about it for a year 547 00:29:59,760 --> 00:30:02,440 Speaker 1: paus now and and now it's finally come to fruition. 548 00:30:02,600 --> 00:30:05,680 Speaker 1: So we'll see how that shakes out. But you know, 549 00:30:05,720 --> 00:30:08,640 Speaker 1: by all accounts, the markets positive on this deal. Do 550 00:30:08,720 --> 00:30:12,360 Speaker 1: that make any money selling milk and you know, good 551 00:30:12,360 --> 00:30:14,160 Speaker 1: ease and stuff like that at the front of the store, 552 00:30:14,360 --> 00:30:16,440 Speaker 1: Sure they still do, but you know, a lot of 553 00:30:16,440 --> 00:30:20,360 Speaker 1: that has been impacted by online you know, whether it's 554 00:30:20,400 --> 00:30:24,280 Speaker 1: Amazon or Walmart. You know, the driver of the pharmacy 555 00:30:24,320 --> 00:30:26,240 Speaker 1: business used to be that you had the pharmacy and 556 00:30:26,280 --> 00:30:27,840 Speaker 1: back and you had to walk through all the aisles 557 00:30:27,840 --> 00:30:32,080 Speaker 1: and you you pay you know, over plus for the 558 00:30:32,160 --> 00:30:33,960 Speaker 1: items that you need. But you were willing to pay 559 00:30:34,000 --> 00:30:37,800 Speaker 1: that for a convenience factor. That's slowly shifting. Okay, that's 560 00:30:37,800 --> 00:30:41,120 Speaker 1: where I get the Valentine gifts, CBS, the candy. I mean, 561 00:30:41,200 --> 00:30:44,880 Speaker 1: it's it's a pretty great selection. Um. Jonathan Palmer of 562 00:30:45,000 --> 00:30:47,200 Speaker 1: Bloomberg Intelligence, we thank you as always covering the health 563 00:30:47,200 --> 00:30:52,960 Speaker 1: care space. I have a bond market question before you 564 00:30:53,320 --> 00:30:57,760 Speaker 1: introduced the guests. Do you buy for yield or you're 565 00:30:57,800 --> 00:31:02,200 Speaker 1: buying for the price depreciation? Um? I believe, Excuse me. 566 00:31:02,200 --> 00:31:04,840 Speaker 1: I believe it depends on investment grade versus how yield 567 00:31:04,920 --> 00:31:08,360 Speaker 1: the way I was taught. Okay, Um, but I believe 568 00:31:08,360 --> 00:31:10,760 Speaker 1: you're buying for the spread change. Anyways, we should ask 569 00:31:11,320 --> 00:31:15,160 Speaker 1: Brian Whalen, Co, Chief investment Officer and generalist portfolio manager 570 00:31:15,200 --> 00:31:18,360 Speaker 1: with t c W Investment He invest Management. Excuse me, 571 00:31:18,400 --> 00:31:21,120 Speaker 1: he does join us on the phone for his monthly 572 00:31:21,240 --> 00:31:24,680 Speaker 1: segment on the latest fixed income market moves. Let's start there. 573 00:31:24,680 --> 00:31:29,520 Speaker 1: Brian answer John's questions, do you purchase? Yeah, I'll ask 574 00:31:29,800 --> 00:31:33,680 Speaker 1: do you purchase for a yield appreciation or the price appreciation? 575 00:31:33,680 --> 00:31:38,120 Speaker 1: Because it was the spread they traveling opposite directions. I 576 00:31:38,120 --> 00:31:41,640 Speaker 1: think the answer is yes to all the above. You 577 00:31:41,720 --> 00:31:44,360 Speaker 1: answer for all that and more. I think you you 578 00:31:44,400 --> 00:31:46,680 Speaker 1: buy it depaying your time rise, and you buy it 579 00:31:46,760 --> 00:31:49,760 Speaker 1: for the yield, which right now looks better than it 580 00:31:49,840 --> 00:31:53,240 Speaker 1: has in a long long time. You know five um, 581 00:31:53,440 --> 00:31:56,200 Speaker 1: if you have an opinion on the economy and credit spread, 582 00:31:56,280 --> 00:31:58,200 Speaker 1: you buy it for the total return, which could be 583 00:31:58,240 --> 00:32:00,600 Speaker 1: the price impact up or down to pen on which 584 00:32:00,640 --> 00:32:03,920 Speaker 1: way you know, spreads and interest rates go. And then 585 00:32:03,920 --> 00:32:06,719 Speaker 1: the third reason he didn't manage it, didn't mention excuse me? 586 00:32:06,920 --> 00:32:08,960 Speaker 1: You can buy it for what it does in your portfolio. 587 00:32:09,240 --> 00:32:13,160 Speaker 1: You know, obviously it provides some diversification. Maybe not last year, 588 00:32:13,240 --> 00:32:17,080 Speaker 1: nothing provided diversification last year, but typically uh and certainly 589 00:32:17,120 --> 00:32:19,280 Speaker 1: at a at a yield of about five, you know 590 00:32:19,360 --> 00:32:23,120 Speaker 1: it can offer some diversation and hedging against other pieces 591 00:32:23,160 --> 00:32:26,680 Speaker 1: of your portfolio, like equities or alternatives or emerging markets. 592 00:32:28,160 --> 00:32:31,360 Speaker 1: Let's go a little bit more nerdy. If we shall 593 00:32:32,400 --> 00:32:37,880 Speaker 1: because I'm the person keep going because I'm really a 594 00:32:38,440 --> 00:32:41,400 Speaker 1: genuinely confused when it comes to the bond market. Look, 595 00:32:41,440 --> 00:32:43,320 Speaker 1: they're tied. It's tied at the hip of the Federal Reserve. 596 00:32:43,480 --> 00:32:46,800 Speaker 1: No brainer there. There are cuts priced in, no brainer there. 597 00:32:46,920 --> 00:32:49,680 Speaker 1: We're looking at a tenure yield that's really just trading 598 00:32:49,680 --> 00:32:51,360 Speaker 1: in a range, and it have been for the last 599 00:32:51,400 --> 00:32:53,680 Speaker 1: few months. So why should we care about the bond 600 00:32:53,720 --> 00:32:58,440 Speaker 1: market right now? Oh? It drives, it dries everything. I 601 00:32:58,480 --> 00:33:00,320 Speaker 1: don't think the equity people like to admit that, but 602 00:33:00,360 --> 00:33:03,320 Speaker 1: that's that's the truth. I mean, you know, it's it's 603 00:33:04,000 --> 00:33:08,800 Speaker 1: the smart smart John. I'm glad you said that. I'm glad, 604 00:33:08,880 --> 00:33:11,120 Speaker 1: but I can't say I disagree. I mean, it's it's 605 00:33:11,200 --> 00:33:14,760 Speaker 1: it's behind everyone. You know, a neutral John, you can't 606 00:33:14,760 --> 00:33:18,320 Speaker 1: take the side of the bond people. Oh my god, 607 00:33:19,240 --> 00:33:21,920 Speaker 1: it's your cost of borrowing, you know, it's it's you know, 608 00:33:22,000 --> 00:33:25,400 Speaker 1: it's it's your cost of capital. It impacts currency markets, 609 00:33:25,400 --> 00:33:29,760 Speaker 1: I mean, it has, it has ramifications throughout the global economy. 610 00:33:29,800 --> 00:33:31,280 Speaker 1: So you're supposed to focus on it. Yeah, I mean 611 00:33:31,320 --> 00:33:33,720 Speaker 1: it's been amazing. I'm given how volatile last year was. 612 00:33:34,440 --> 00:33:37,120 Speaker 1: You know, the ten year. Um, you know, the five 613 00:33:37,160 --> 00:33:38,760 Speaker 1: ten in the thirty years kind of all kind of 614 00:33:38,800 --> 00:33:41,160 Speaker 1: settled into a range here. And you know, since the 615 00:33:41,160 --> 00:33:43,160 Speaker 1: employment report last Friday, we've had a little bit of 616 00:33:43,160 --> 00:33:45,880 Speaker 1: a sell off, but um, you know, honestly, it feels 617 00:33:46,120 --> 00:33:51,120 Speaker 1: incredibly um, I'll say, almost son of seamless um in 618 00:33:51,200 --> 00:33:53,200 Speaker 1: terms of the adjustment the market just made. You know, 619 00:33:53,240 --> 00:33:57,760 Speaker 1: it's a very strong employment on Friday. It basically then 620 00:33:57,840 --> 00:34:00,280 Speaker 1: just said, okay, you know what, five or it's not 621 00:34:00,280 --> 00:34:02,040 Speaker 1: going to be the upper bound. It's gonna be five 622 00:34:02,040 --> 00:34:04,240 Speaker 1: and a quarter percent. But once we get there, the 623 00:34:04,280 --> 00:34:05,960 Speaker 1: Fed's gonna stay on hold for most of the year. 624 00:34:06,400 --> 00:34:08,440 Speaker 1: And then, just like we've thought for months now, by 625 00:34:08,440 --> 00:34:09,680 Speaker 1: the end of the year, they're going to make a 626 00:34:09,719 --> 00:34:12,640 Speaker 1: couple of cuts and by the end of four you know, 627 00:34:12,680 --> 00:34:14,319 Speaker 1: we're you know, we're they're going to make at least 628 00:34:14,320 --> 00:34:16,400 Speaker 1: in a hundred more cuts. Uh. And so it's been 629 00:34:16,440 --> 00:34:19,560 Speaker 1: amazing just how strong that member was. What I'd say 630 00:34:19,640 --> 00:34:21,800 Speaker 1: is a fairly seamless adjustment, both in the bond market 631 00:34:21,840 --> 00:34:23,480 Speaker 1: as well as you know, every other market. But that 632 00:34:23,520 --> 00:34:27,760 Speaker 1: feels like a fairly consensus take there, which then brings 633 00:34:27,760 --> 00:34:30,280 Speaker 1: me back to my original question, how do you even 634 00:34:30,280 --> 00:34:32,600 Speaker 1: trade it? Then? Is that why we're seeing this trading 635 00:34:32,680 --> 00:34:34,400 Speaker 1: range for the tenure, but you're also seeing in the 636 00:34:34,400 --> 00:34:36,680 Speaker 1: two years as well. Is it because those cuts are 637 00:34:36,719 --> 00:34:41,120 Speaker 1: so strongly priced in that's essentially creating a cap. Yeah, 638 00:34:41,239 --> 00:34:44,040 Speaker 1: you know, I'd say the this whole market reeks of 639 00:34:44,160 --> 00:34:47,279 Speaker 1: in patients. You know, it's year to date, it's got 640 00:34:47,520 --> 00:34:49,920 Speaker 1: kind of like a fomo rally, meaning you know, I 641 00:34:49,920 --> 00:34:52,080 Speaker 1: think you know, it just feels like investors want to 642 00:34:52,120 --> 00:34:54,480 Speaker 1: look around and say, all right, you know, we're ten 643 00:34:54,480 --> 00:34:57,560 Speaker 1: months into a tightening cycle and the economy hasn't rolled over. 644 00:34:57,960 --> 00:35:00,840 Speaker 1: You know, an unemployment is still low. It must be 645 00:35:00,880 --> 00:35:03,240 Speaker 1: a soft landing. There isn't gonna be recession, and therefore 646 00:35:03,239 --> 00:35:05,440 Speaker 1: I'm gonna run out and buy risk. And you know, 647 00:35:05,520 --> 00:35:07,040 Speaker 1: I think we kind of scratch our heads a little 648 00:35:07,040 --> 00:35:08,440 Speaker 1: bit and say, you know what, like, you know, the 649 00:35:08,520 --> 00:35:10,880 Speaker 1: term long and variable but didn't come out of nowhere. 650 00:35:11,239 --> 00:35:14,760 Speaker 1: It's there for a reason. And typically typically ten months 651 00:35:14,760 --> 00:35:17,320 Speaker 1: into a monetary tightening cycle, you don't have a recession. 652 00:35:17,360 --> 00:35:20,600 Speaker 1: Yet you don't see the economy rolling over, especially this time. 653 00:35:20,960 --> 00:35:24,440 Speaker 1: You know, we came into you know, the consumer had 654 00:35:24,760 --> 00:35:27,560 Speaker 1: well over a trillion dollars of excess savings, you know, 655 00:35:27,680 --> 00:35:29,960 Speaker 1: and when you look at an employment report ten months 656 00:35:29,960 --> 00:35:32,719 Speaker 1: into a tightening cycle, with that kind of kind of 657 00:35:32,880 --> 00:35:35,440 Speaker 1: momentum in the economy, and from all that, you know, 658 00:35:35,480 --> 00:35:39,319 Speaker 1: that accumulated savings, it shouldn't surprise anybody that we haven't 659 00:35:39,360 --> 00:35:41,719 Speaker 1: rolled over yet. But it's just gonna take some time. So, 660 00:35:42,520 --> 00:35:45,120 Speaker 1: you know, when we look at interest rates, or particularly 661 00:35:45,120 --> 00:35:47,120 Speaker 1: when we look at things like credit spreads, like you know, 662 00:35:47,239 --> 00:35:50,560 Speaker 1: high yield trading at three ninety over treasuries and if 663 00:35:50,600 --> 00:35:52,920 Speaker 1: you exclude kind of the distress part of that market, 664 00:35:53,520 --> 00:35:55,800 Speaker 1: hi yield bonds only offer a yield cream of about 665 00:35:55,800 --> 00:35:58,600 Speaker 1: three percent over treasuries, which I will tell you, and 666 00:35:58,640 --> 00:36:00,920 Speaker 1: you know, the listeners, that's pretty that's that's not a 667 00:36:00,920 --> 00:36:04,480 Speaker 1: lot of compensation. That's what we call that's pretty tight. Uh, 668 00:36:04,560 --> 00:36:07,800 Speaker 1: it's certainly not indicative of of the risk of entering 669 00:36:07,800 --> 00:36:10,800 Speaker 1: our sessions. So to my first point, it just seems 670 00:36:10,800 --> 00:36:12,560 Speaker 1: like the market wants to kind of a rush to 671 00:36:12,680 --> 00:36:16,680 Speaker 1: judgment on what this monetary tightening cycle has done or 672 00:36:16,719 --> 00:36:18,799 Speaker 1: has not done. And I think, you know, we would 673 00:36:18,840 --> 00:36:21,759 Speaker 1: kind of caution everyone to be patient because, uh, you know, 674 00:36:21,920 --> 00:36:24,560 Speaker 1: monetary tightening is long and variable, and we think we'll 675 00:36:24,560 --> 00:36:26,520 Speaker 1: see the impact of it later this year. Okay, we 676 00:36:26,640 --> 00:36:29,879 Speaker 1: both get duration. It's just like how long is the instrument? Right? 677 00:36:30,480 --> 00:36:34,160 Speaker 1: Can you explain to me give me the real stupid person, 678 00:36:34,400 --> 00:36:37,840 Speaker 1: me being the stupid person, explanation of convexity in the 679 00:36:37,840 --> 00:36:41,280 Speaker 1: bond market. Oh, that's the that's that, that's your change 680 00:36:41,280 --> 00:36:44,719 Speaker 1: of duration. Let let me let me give you an 681 00:36:44,760 --> 00:36:52,680 Speaker 1: easy example. No, no, it's just we're gonna out your 682 00:36:52,719 --> 00:36:54,919 Speaker 1: your I warned you your you're you're ready. He's gonna 683 00:36:54,920 --> 00:36:58,920 Speaker 1: plumb it here. But let's let's do it. So when 684 00:36:58,960 --> 00:37:02,160 Speaker 1: you started, thank you, here we go. You've got a mortgage, right, 685 00:37:02,360 --> 00:37:05,239 Speaker 1: and you have an option you can either pay that 686 00:37:06,280 --> 00:37:08,800 Speaker 1: forever you know you can, or you can refinance it 687 00:37:08,840 --> 00:37:11,279 Speaker 1: when interest rates drop. Right, And that means if you 688 00:37:11,320 --> 00:37:13,680 Speaker 1: think about that, from the timing of all the cash 689 00:37:13,719 --> 00:37:16,080 Speaker 1: flow that you're paying, it can shift. It can get 690 00:37:16,080 --> 00:37:19,000 Speaker 1: really short, or it can shift out really long, depending 691 00:37:19,080 --> 00:37:22,719 Speaker 1: upon what you want to do with your prepayment option. Now, 692 00:37:22,800 --> 00:37:27,600 Speaker 1: picture a bond backed by a thousand of those mortgages. 693 00:37:28,160 --> 00:37:32,200 Speaker 1: What happens is everybody's got a three percent mortgage. You 694 00:37:32,360 --> 00:37:35,200 Speaker 1: enter a year like two. When interest rates sell off 695 00:37:35,200 --> 00:37:38,240 Speaker 1: and get much much higher interest rates, you know, mortgage 696 00:37:38,320 --> 00:37:41,120 Speaker 1: rates go to six or seven percent. Most homeowners are 697 00:37:41,120 --> 00:37:43,080 Speaker 1: gonna look at that and say, you know what, I 698 00:37:43,120 --> 00:37:45,239 Speaker 1: love my home, I love my school district. This is 699 00:37:45,280 --> 00:37:47,239 Speaker 1: a great place. I don't want to move and pay 700 00:37:47,280 --> 00:37:49,759 Speaker 1: six percent a three percent, So I think I'll sit 701 00:37:49,800 --> 00:37:52,840 Speaker 1: here for the next thirty years, which means the bond 702 00:37:53,000 --> 00:37:56,080 Speaker 1: backed by a thousand of those decisions, just went from 703 00:37:56,120 --> 00:37:59,680 Speaker 1: being a three year bond to a seven year bond. 704 00:38:00,160 --> 00:38:02,680 Speaker 1: And I will tell you when you have a seven 705 00:38:02,760 --> 00:38:06,239 Speaker 1: year bond, it's price goes down a lot more when 706 00:38:06,320 --> 00:38:08,359 Speaker 1: rates rise in a three year bond. And so that's 707 00:38:08,360 --> 00:38:10,239 Speaker 1: what happened to the mortgage market last year, and that's 708 00:38:10,239 --> 00:38:12,480 Speaker 1: actually why it's one of the cheaper areas of the market. 709 00:38:13,120 --> 00:38:18,000 Speaker 1: It extended, the price performance was very poor um and 710 00:38:18,440 --> 00:38:21,040 Speaker 1: a lot of investors fled that market, which made it cheap, 711 00:38:21,400 --> 00:38:23,440 Speaker 1: which is why it's one of the few places we 712 00:38:23,480 --> 00:38:27,040 Speaker 1: actually have, let's say, a higher exposure than other areas 713 00:38:27,040 --> 00:38:29,960 Speaker 1: because it looks cheap because of that extension of duration, 714 00:38:30,440 --> 00:38:32,959 Speaker 1: which is negative convex me. Did that answer your question, 715 00:38:33,000 --> 00:38:36,200 Speaker 1: John Tucker? It does. It's also I guess explains that 716 00:38:36,320 --> 00:38:39,480 Speaker 1: it's kind of different on the way up and from 717 00:38:39,520 --> 00:38:42,480 Speaker 1: the way down. There's a different dynamic in place. I 718 00:38:42,520 --> 00:38:46,560 Speaker 1: guess first drive to bond math right here on Bloomber 719 00:38:46,640 --> 00:38:52,120 Speaker 1: Radio Market. Yeah, those of you, now that was great. 720 00:38:52,320 --> 00:38:54,600 Speaker 1: That really was Brian Whale and co Chief investment Officer 721 00:38:54,680 --> 00:38:57,680 Speaker 1: and generals portfolio manager at we T c W Investment Management. 722 00:38:57,680 --> 00:39:03,160 Speaker 1: We thank you as always, thanks for listening to the 723 00:39:03,200 --> 00:39:07,120 Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews 724 00:39:07,120 --> 00:39:11,439 Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm 725 00:39:11,440 --> 00:39:15,799 Speaker 1: Matt Miller. I'm on Twitter at Matt Miller three pt 726 00:39:15,840 --> 00:39:18,480 Speaker 1: on Ball Sweeney, I'm on Twitter at pt Sweeney. Before 727 00:39:18,480 --> 00:39:21,320 Speaker 1: the podcast. You can always catch us worldwide at Bloomberg 728 00:39:21,400 --> 00:39:21,640 Speaker 1: Radio